value (in economics)

value (in economics)

value, in economics, worth of a commodity in terms of other commodities, or in terms of money (see price). Value depends on both desirability and scarcity. The marginal theory of value, pioneered in the late 19th cent. by Leon Walras, Stanley Jevons, and Carl Menger, has been highly influential in economics. It takes account of both scarcity and desirability by holding that the total value of a good depends on the utility rendered by the last unit consumed. It developed in opposition to David Ricardo's earlier labor theory of value, which holds that the value of a good derives from the effort of production, based on supply. Ricardo asserted that the cost of production can be reduced to the cost of labor, either paid in wages or used as capital, the physical means of production. In the marginal theory of value, there is an exchange value, as Ricardo postulated, but there is also a use value, which signifies the utility of a given commodity for satisfying a human desire. This distinction is equally important in Marxian economics. Marginal theory is fundamental to modern economics, because it points out that both supply and demand have an impact on the price of a commodity.

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